Delayed Commercialization And Slow Consumables Adoption Will Eventually Support Long-Term Proteomics Potential

Catalysts

About Quantum-Si

Quantum-Si develops single molecule protein sequencing platforms and consumables that enable high resolution proteomic analysis for research and translational laboratories.

What are the underlying business or industry changes driving this perspective?

• Although prototype Proteus systems are already generating sequencing data and the company is targeting launch by the end of 2026, any delay integrating hardware, chemistry and manufacturing scale could push out commercialization and defer the anticipated step change in instrument and consumables revenue.
• While the growing number of publications, academic placements and collaborations with institutions such as the Broad Institute and Department of Defense labs help validate the technology, slower than expected conversion of this installed base into high volume routine usage could limit recurring consumables demand and constrain gross margin expansion.
• Although next generation library preparation and sequencing kits are designed to support lower input samples and higher multiplexing, if these enhancements fail to unlock materially broader use cases across pharma, biotech and translational research, instrument utilization may remain subscale and delay operating leverage in earnings.
• While the company is amassing a large proprietary amino acid recognizer data set and applying artificial intelligence tools to accelerate development, if this effort does not translate into timely full proteome coverage and differentiated analytical capabilities, pricing power and long term revenue growth from advanced applications may be weaker than expected.
• Although management is tightly managing cash and has reduced adjusted operating expenses while maintaining a substantial cash balance and shelf capacity, persistent capital equipment headwinds in life sciences and extended 9 to 12 month sales cycles could require additional dilutionary financing before revenues and net margins inflect positively.

Assumptions

This narrative explores a more pessimistic perspective on Quantum-Si compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts. How have these above catalysts been quantified?

• The bearish analysts are assuming Quantum-Si's revenue will grow by 54.6% annually over the next 3 years.
• The bearish analysts are not forecasting that Quantum-Si will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Quantum-Si's profit margin will increase from -3678.0% to the average US Life Sciences industry of 15.5% in 3 years.
• If Quantum-Si's profit margin were to converge on the industry average, you could expect earnings to reach $1.8 million (and earnings per share of $0.01) by about December 2028, up from $-116.8 million today.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 362.6x on those 2028 earnings, up from -2.7x today. This future PE is greater than the current PE for the US Life Sciences industry at 35.7x.
• The bearish analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.74%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Persistent capital equipment headwinds, elongated nine to twelve month sales cycles, and NIH funding uncertainty in academic research could structurally cap instrument demand and limit scaling of the installed base. This could constrain long term revenue growth and delay operating leverage in earnings and net margins.
• The shift toward placement based models rather than upfront instrument sales, while expanding access, reduces near term capital revenue and makes the business more dependent on ramping consumable utilization. This may scale more slowly than anticipated and weigh on both total revenue and gross margins.
• Proteus remains in the prototype and optimization phase, and any delays or setbacks in chemistry integration, manufacturing scale up, or achieving full proteome coverage could push out commercialization timelines and slow the transition to higher value applications. This could pressure medium term revenue and prolong deeply negative earnings.
• Despite tight cost controls, GAAP operating expenses remain high and cash burn guidance of over one hundred million dollars in 2025, combined with a new three hundred million dollar shelf and at the market facility, increases the likelihood of future equity issuance that could dilute shareholders if revenue and margin expansion lag expectations. This could undermine per share earnings.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bearish price target for Quantum-Si is $2.0, which represents up to two standard deviations below the consensus price target of $2.85. This valuation is based on what can be assumed as the expectations of Quantum-Si's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $4.05, and the most bearish reporting a price target of just $2.0.
  
• In order for you to agree with the more bearish analyst cohort, you'd need to believe that by 2028, revenues will be $11.7 million, earnings will come to $1.8 million, and it would be trading on a PE ratio of 362.6x, assuming you use a discount rate of 7.7%.
  
• Given the current share price of $1.45, the analyst price target of $2.0 is 27.5% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.